Hanes: Clean Shirts for a Cleaner World
HanesBrands' established environmental sustainability policy creates a competitive advantage in an era of changing global climate legislation.
As the world’s largest marketer of basic apparel and selling more underwear, socks, shapewear, hosiery, and T-shirts than any other company in the United States, HanesBrands (Hanes) exemplifies how intertwining environmental stewardship into the business model creates a competitive advantage as companies must now respond to new global climate change legislation.
In 2006, Sara Lee Corporation spun off several business units and manufacturing entities into what would become Hanes[1]. Although each former business unit had its own approach to energy management and some had tracked energy performance, there was no unifying corporate strategy to energy management. Thus, in 2007, the company established a few lofty five-year environmental goals as part of a company-wide program that would protect the environment while reducing energy costs. In 2012, Hanes successfully achieved its goals for reducing energy consumption, carbon dioxide emissions, water use, and its target usage of renewable energy sources. Its performance, as well as new goals for 2020, are detailed below.
Exhibit 1: Environmental Performance Data[2]
As Hanes steadily worked towards its goals through the years, it has quietly built up a reputation as a socially responsible manufacturer. The U.S. Environmental Protection Agency has honored Hanes for seven consecutive years for conscientious energy management with its Energy Star Award. In addition, Newsweek ranked Hanes as number two in its 2012 list of the Greenest Companies in America (among textile, apparel & luxury good companies)[3]. Hanes considers this environmental effort as a major business strategy; to create value for employees, shareholders, and customers, the company must use “sustainable practices and conserve natural resources to mitigate [its] environmental footprint and reduce costs[4].” Because the company is vertically integrated (more than 90% of the apparel units Hanes sells are manufactured in its own plants or those of dedicated contractors), large energy cost savings could be achieved if there is an effective energy management process in place. As a matter of fact, these energy practices had saved the company more than $23 million in energy and water costs in 2012[5].
Aside from the cost savings, how does this create a competitive advantage for Hanes? As the Paris Agreement to address climate change officially goes into effect today, the next step for world leaders is to set in place the details and metrics to monitor companies’ and countries’ emissions in order to actually achieve the agreement’s goal of limiting the increase in global temperatures to two degrees Celsius[6]. This is the first time in the history of the world that a majority of countries from a carbon emissions standpoint have agreed to legally binding limits of global temperature increases. However, even if each country accomplishes the agreement’s initial pledges, the expected temperature increase would still be over two degrees. Thus, in the next few years, each country is expected to set even deeper reductions.
However, most companies do not even know how much greenhouse gas they emit, much less be able to curb their emissions. Hanes, on the other hand, has emphasized environmental responsibility for over a decade and now has an established process and structure in place to both measure and reduce its energy consumption and emissions. Arguably, this gives the company first mover advantage and will enable Hanes to continue to focus on all aspects of its business, rather than scramble to fit an existing business model within the confines of new regulations and governance structures.
While its energy conservation program appears robust, the company should now also consider what its strategy should be to address potential raw material supply shortages. Cotton is the company’s largest raw material purchase and crop yields are extremely sensitive to water[7]. In order to shield itself from risks with raw material price fluctuations, Hanes should also consider in experimenting with alternatives. For example, competitor VF Corp, who manufactures brands such as Wrangler, The North Face, and Nautica, has begun experimenting with less water-intensive cotton plants as well as incorporating cotton substitutes on a mass scale into its clothing lines.
In light of a dynamic and ever changing international law and regulatory atmosphere with respect to sustainability challenges such as the climate crisis, it is now more imperative than ever that businesses have the foresight to build out sustainable solutions that are also economically viable. Although Hanes had been at that forefront and should be able to reap the fruit of its labor, it must not be complacent. (735 words)
Sources:
[1] “Sara Lee Corporation Announces Hanesbrands Inc. Spin-off Distribution Ratio and Record and Distribution Dates; Company on Track to Complete Hanesbrands Spin-off on Sept. 5, 2006.” Business Wire. N.p., 07 Aug. 2006. Web. 04 Nov. 2016.
[2] “Environmental Performance Data.” HanesBrands Inc. Corporate Social Responsibility, n.d. Web. 4 Nov. 2016. <link>.
[3] Ibid.
[4] “Corporate Social Responsibility.” HanesBrands Inc Global Procurement: About Global Procurement: Corporate Social Responsibility. N.p., n.d. Web. 04 Nov. 2016. <link>.
[5] “How EPA’s ENERGY STAR® Program Helped Unite HanesBrands’ Energy Strategy.” Leading the Way – A Profile in Successful Energy Management (n.d.): n. pag. 20 Feb. 2013. Web. 4 Nov. 2016. <link>.
[6] Bradsher, Keith. “The Paris Agreement on Climate Change Is Official. Now What?” New York Times. N.p., 3 Nov. 2016. Web. 4 Nov. 2016.
[7] Gallucci, Maria. “Climate Change: Global Clothing Companies Seek Alternatives To Cotton As Future Drought And Extreme Heat Threaten To Hurt Yields.” International Business Times. N.p., 05 Dec. 2015. Web. 04 Nov. 2016.
I think it’s particularly impressive that Hanes was able to meet its rather lofty environmental goals in just five years, by shifting from a fragmented, non-unified strategy to implementing a company-wide initiative. I completely agree with your point that Hanes’ vertical integration contributed significantly to the company’s ability to reach its energy management goals in such a short time frame, and it makes me wonder how achievable it is for a global apparel company to meet new environmental goals without a strong, vertically integrated supply chain. I learned that, in addition to Hanes, Fruit of the Loom also has been extremely involved in environmental initiatives and has received similar awards on energy management. In particular, Fruit of the Loom’s website discusses its aggressive energy initiatives and EPA awards, crediting its company strategy and vertical integration as key factors in achieving its targets (http://www.fotlinc.com/pages/environmental-news.html#.WB52o_orLb0). Your post and this article make me wonder just how important and necessary vertical integration is to achieving impactful, sustainable environmental practices.
Very interesting article on Hanes’ sustainability strategy! I agree that while their energy and GHG reduction initiatives appear to be successful, I think it would be important to next turn to developing a sustainability approach for sourcing their raw materials. According to IKEA’s sustainability report (http://www.ikea.com/ms/en_US/img/ad_content/2015_IKEA_sustainability_report.pdf), they source cotton from producers that align with the Better Cotton Standard, and through the “e3 Cotton Program” in the United States. Cotton farmers whose practices align with these initiatives not only use less water but also less fertilizers and pesticides and work towards biodiversity conservation. It would be great if Hanes could commit to sourcing a certain percentage of their cotton from farmers that adhere to the guidelines recommended by these same initiatives and programs.
It is great to hear that Hanes is a leading player within its industry as it relates to sustainability and that the company has successfully managed to reduce its Energy Consumption, Carbon Dioxide Emissions, and Water Consumption. On important environmental issue that was not mentioned however is the proliferation of GMO cotton, the issues it has created, and the actions that Hanes is taking with respect to GMO cotton in its sourcing. Today, 96% of the cotton grown in the US is genetically modified, and 95% of the cotton grown in India, the largest producer of cotton, is genetically modified. In addition to the environmental impacts that GMO cotton seeds have had on the planet, due to the high prices of GMO seeds, GMO cotton has also caused a lot of hardship for cotton farmers, particularly in India. (https://www.rt.com/news/261673-india-gmo-cotton-suicides/?). Given that Hanes is such a large player in the industry, does the company have a responsibility to take action against this issue?
Interesting post! The idea that competitors such as VF corp are experimenting with plants that require less water reminds me of Indigo Agriculture and the push for science to keep up pace against environmental damage. I’m impressed to learn that the company’s sustainability practices have helped them save $23 million in energy and water costs. This is a great example of the beneficial linkage between sustainable practices and turning a better profit – whereas we usually think of sustainability as a cost-creator rather than a cost-saver. I am glad Hanes is leading through example, but I wonder how much more they could do with their size, scale, and influence in the sector, to rally other competitors together toward a common cause.
Really interesting post! I’m impressed Hanes saved $23m in water and energy costs through their sustainability initiatives in 2012, but it makes me think they can set even more aggressive targets going forward. Given how much they rely on cotton as an input, I’m surprised they have not done more to protect themselves from potential commodity price risks. It seems that in addition to exploring alternative inputs, they may want to further vertically integrate or develop partnerships to protect their supply. Since transportation is a large driver of greenhouse gas emissions, I wonder if Hanes could also do more to manufacture its clothing closer to its end customers and limit the distance it has to transport its finished goods.
This makes me like Hanes even more! I wonder the true extent to which their reputation as a socially responsible manufacturer has improved their sales. Personally, knowing this about Hanes makes me more likely to purchase their apparel over that of equal competitor but I can only imagine the average consumer has no idea about the measures Hanes is taking with respect to energy management. It would be interesting to learn more about the true advantages gained by their vertically integrated process. I must admit I am rather naive and am unsure as to whether this is common practice, but I imagine it provides Hanes with more power and control to shape the future sustainability practices of their business.
Very interesting take on the competitive edge, can create a significant difference if knee-jerk regulations take up management bandwidth at competitors. It is a very interesting take on “paying now for future strategic positioning”. Would love to see how this plays out.
I am a little more skeptical about the immediate cost savings of the overall initiative. Given that the $23 million savings is calculated using a baseline from 2007 (one year after the spin-off), the baseline metrics might have had some low hanging fruits built into them. Would love to know more about recent performance and savings!
Addressing climate change the post turned out to be a great lesson in strategy too!